The die is cast for the legislature’s look at the state’s largest workers’ compensation insurer, with Democrats taking shots at Pinnacol Assurance’s large surplus and Republicans protesting the probe’s existence.

But Pinnacol has a strong advocate on the 16-member committee: itself.

The panel that will decide whether the state should absorb, privatize, deregulate or leave the quasi-governmental agency as is includes Pinnacol’s president as well as a current Pinnacol board member and a former board member.

Democrats, including committee chairwoman Sen. Morgan Carroll of Aurora, say Pinnacol’s presence on the committee could pose conflicts of interest if the panel considers subpoenaing records or begins delving into sensitive topics such as executive bonuses.

The committee Tuesday began probing some propositions that could have serious consequences for Pinnacol, such as allowing other insurers to compete for a share of the hard-to-insure market that Pinnacol serves.

“It’s very unusual to have the subject of an investigation have a part in that investigation. It may make it harder to have impartiality,” Carroll said. “Their inside information is great, but these are questions we should ask.”

Pinnacol president Ken Ross said that although the committee probably will recommend legislation, it won’t have final say on any laws that might affect his firm.

That work will be left to lawmakers next year.

Ross and Pinnacol board member Gary Johnson were placed on the committee at the behest of the insurer and Republican lawmakers.

“It might be unusual, but hopefully we’ve helped the committee,” said Ross, who also testified Tuesday. “We want to be an active participant.”

None of the nonlegislative panelists will be able to overrule the decision of the committee’s 10 lawmakers, according to the committee’s rules.

The probe stems from a failed attempt by lawmakers, most of them Democrats, this spring to seize $500 million from Pinnacol’s surplus to help balance the budget. The fight brought to light questions about the status of the insurer, which began as a clearly governmental agency but now claims more independence from the state.

Pinnacol has raised the proposition of paying state taxes and an unnamed lump sum for greater autonomy.

Republican Sen. Shawn Mitchell, R-Broomfield, pointed out that although chairwoman Carroll does not technically have a conflict of interest under the state’s definition, she has an agenda as a lawyer who handles workers’ compensation claims.

Mitchell led the GOP protest against the hearings and called them retribution against Pinnacol for refusing to bail out the state.

“The majority tried to raid Pinnacol’s surplus and were defeated. They came up with this face-saving study,” Mitchell said. “The study is an exercise in a waste of time . . . and taxpayer money.”

Although Tuesday’s meeting — the first in a series — was largely a primer on how the state’s workers’ compensation system operates, a few themes began to emerge.

Democrats plan to look more closely at whether doctors and other medical professionals who advise Pinnacol are somehow rewarded for helping to deny claims, said Rep. Sal Pace, D-Pueblo.

He and others questioned whether Pinnacol’s surplus of $700 million — more than industry guidelines recommend — stems from overcharging policyholders or returning too few dividends.

Ross countered, saying the insurer returned $120 million to policyholders this year alone and must win approval from the state’s insurance commission before setting rates.

In a statement touting Pinnacol’s success, Ross said, “Pinnacol has reduced rates by over 42 percent in (four years), which represents cost savings to Colorado businesses in the amount of $205 million.”

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